Growth via M&As
South Korea’s leading chemical and secondary battery maker LG Chem Ltd. is expanding its business areas to automotive components and materials by acquiring companies. LG Group has been somewhat passive in M&As, but it is now pursuing a speedy and aggressive business strategy under its new chairman Koo Kwang-mo, who took office at the end of June.
LG Chem announced on Sept. 12 that it has purchased a 100 percent stake in Uniseal Inc. from its parent company Koch Enterprises Inc. Although the company did not disclose the acquisition price, market experts estimated the company's value would reach around 150 billion won (US$132.92 million).
Founded in 1960, Uniseal, an American automotive adhesive maker, was recently picked as one of the top 25 adhesive companies by Adhesives & Sealants Industry (ASI) magazine. The Indiana-based firm that supplies its products to major North American finished carmakers, including GM and Ford, recorded 63 billion won (US$55.83 million) in sales last year.
The global auto sealant market is expected to show an annual growth rate of more than 8 percent from 5.1 trillion won (US$4.52 billion) last year to 6.5 trillion won (US$5.76 billion) by 2020 and 8.4 trillion won (US$7.44 billion) by 2023.
Accordingly, LG Chem has strengthened its competence in automotive materials further. The company currently produces batteries, the core component of electric vehicles, and cathodes, the core raw materials. It also manufactures acrylonitrile butadiene styrene (ABS) and engineering plastic, highly functional materials that are generally used in automotive interior and exterior materials, and adhesive tapes for electric vehicles.
Previously, LG Chem took over US-based desalination membrane manufacturer NanoH2O for US$200 million (225.7 billion won) to improve its competitiveness in water purification filters and South Korean agrochemical company Dongbu Farm Hannong to expand its business to bio areas. Then, it merged with its subsidiary LG Life Sciences Ltd. to promote bio as its main business. With the latest acquisition, the company will be able to diversify its portfolios in automotive materials. LG Chem has been actively making use of M&As to expand its new businesses.
In addition to LG Chem, LG Group’s other major subsidiaries have made similar moves. LG Electronics Inc. acquired ZKW, an Austrian automobile lighting supplier, as well as invested US$3 million (3.39 billion won) in Bossa Nova Robotics, a US-based robot developer.
Market experts expect that LG Group will take a strategic M&A move to launch a new business in advance at a faster pace as its subsidiaries have been more aggressively promoting the new business after the inauguration of chairman Koo Kwang-mo. Particularly, all eyes are on whether the group will push ahead with large M&As based on artificial intelligence (AI), robot and car parts and materials sectors.